Podcasting in Year Two

In little over a month, podcasting will celebrate its first birthday (that is, if you take the birth of the medium to be Adam Curry’s launch of ipodder – let’s not get into a fight over it). In its first year of existence, podcasting has become something of a phenomenon. With most podcast directories now indexing over 4000 shows, and most of those being unaffiliated with a traditional media outlet, we’ve witnessed a Cambrian explosion in independent audio programming. A year ago, if you wanted to listen to audio content during the day, you were at the mercy of your local radio stations. How many options did you have? 20? 50? Today you can choose from thousands of shows to listen to. Podcasting has been talked about by every major news organization on the planet. Many have gone on to start their own podcasts.

So… that was Year One. What is going to happen in Year Two? Will the bubble burst? Will every man, woman and child on the planet have their own show? Is radio dead?

In the 11 year history of the Web we’ve seen many discontinuous innovations appear and traverse the “hype curve”. This curve predicts that new products and services will be talked up by the press, analysts and investors when they first arrive in the marketplace because that’s what drives their businesses. Expectations for the new innovation are blown totally out of proportion until, inevitably, the new companies that arise to exploit these innovations fail to meet those expectations of the market. The next phase of the cycle involves disillusionment and abandonment. The same press, analysts and investors that hyped up the innovation dump it unceremoniously and move on to the next “new big thing”. This is often followed by a knowing nod of the head by people who “knew this wasn’t going to work” and by investors wondering why they didn’t sell the stock a month before, when it was at its peak. It is also followed, however, by lots of hard work by the businesses that continue to develop the innovation and proceed through “the chasm”. Remember the “crash” of B2C and the whole “e-business is just business” faux business wisdom that followed? Now look up Amazon and eBay’s revenues, profits and market cap.

Geoffrey Moore, in his 1991 book "Crossing The Chasm", describes a chasm that exists between the early adopters (the technology enthusiasts and visionaries) of a product or service that is introduced by a discontinuous innovation and the early majority (the pragmatists). This chasm exists because visionaries and pragmatists have very different expectations and buying behaviour.

I believe podcasting will experience a chasm, a sudden decline in hype, but when this will occur, we cannot predict. A decline in hype, however, usually doesn’t indicate a decline in demand, but merely a recalibration. When the chasm hits podcasting, it will simply signal the time to address the demands of the early majority. Watch the birds fly, though, when it happens.

Let’s look for a moment at the question of whether or not there is a business to be built around podcasting.

In the last couple of months I’ve read many articles suggesting that a business model for podcasting doesn’t exist. Most of those articles seem to miss a few of key facts.

FACT #1 – The Business Model Already Exists.

Advertising on audio programming already exists in a very big way. In 2003, worldwide radio plus out-of-home advertising spend was USD$55.5 billion and is expected to increase to an estimated $71 billion in 2008. We don’t need to invent a new business model. This isn’t the huge leap that advertisers had to make in the late 1990s to get their heads around online advertising. And ask any honest advertiser and they will probably admit that they know their radio spend isn’t very effective. When your advertisement is being broadcast out to hundreds of thousands of people of every age, race, income and gender, you don’t really know with whom you are communicating. You have no means of tracking it.

FACT #2 - This Isn’t Online Advertising.

I’ve read comparisons of podcasting subscriber levels to website traffic with the accompanying suggestion that CPM models used for banner advertisements can be applied to podcasting. Obviously radio advertising doesn’t work under those models and neither will podcasting.

FACT #3 – Podcasting Is The Evolution Of Radio, Not Just Another Vehicle For Radio.

The economics of radio requires it to create shows which appeal to broad audience demographics. This inevitably leads to the watering-down of programming. In addition, federal regulatory bodies such as the FCC in the United States censor radio content, sometimes to the extreme, so we end up with radio programming which doesn't talk how we talk, doesn't talk about the subjects we talk about and, essentially, does not represent either who we are or who we want to become. It no longer represents us, especially the 15 – 35 age demographic. The economics of podcasting is at the other extreme to radio. We don't have to buy a multi-million dollar broadcasting licence. We simply use a PC. It costs us practically nothing to produce a podcast and a small amount of money to host and distribute the shows. Our marketing is done through blogging, not through multi-million dollar television commercials. Thanks to our economic model, we can produce shows for global niche audiences cost effectively, making our shows more relevant to our audiences and more effective channels for advertisers to communicate their messages in a targeted fashion.

So, in summary, I’m convinced that podcasting is here to stay but that the hype it is experiencing at the moment will be transitory. There are several business models emerging (a content play versus a platform play) and a lot of work to be done on making shows easy to find and easy to subscribe to. By working together in groups such as The Podcast Network and the International Nanocasting Alliance to improve standards and solve infrastructure issues, we will gradually build podcasting into a stable and viable industry and as a legitimate channel for advertising and entertainment.

Just remember one thing – revolutions always take longer than the dreams of the entrepreneurs who start them. As my old boss Bill Gates is fond of stating "most people overestimate what is going to happen in the next two or three years and underestimate what is going to happen in the next decade."

Comments

[Tony]

I am no business expert and thus I look at podcasting in a different way that you and Mick are atm. I think podcasting done right could be great for advertisers as it is easier to target a particular market than you can on general radio. You can target your ads to people interested in what your selling..I guess it si similar to google ads in that the ads shown reflect the site your visiting in most cases.

The people who listen to Dawn and Drew (raises hand) normally won't attract the same market as maybe IT conversations or maybe a podcast about knitting. Advertisers can target those different markets thouh and make better use of their dollars and I think it would be more cost-effective to advertise via podcasts than it is for them to advertise on radio.

With radio as long as you have enough money and it's not totally offensive you can probably buy advertising time on any station but will you also get the target you want. Maybe if you advertise on JJJ or MMM you may get the 15-35 crowd but I think they are two totally different markets.

Podcasting is the next big thing and how long it will stay there is uncertain. As I mentioned in a different post it is radio when you want it meaning you can download a show but you don't have to tune in at a particular time to listen but can listen to it in a few days if you wish, the choice is yours. This is the way of the future as people are doing more and have less time to do things like watching tv or listening to the radio at a specific time. Just look how successful VCR's were and now DVD-recorders and PVR's where you can record shows and watch at your leisure.

It is the future and will only get better.

As I said I am a listener and not a business person but I know almost always use my Ipod for podcasts and not music anymore. I haven't listened to the radio in years but I kind of feel like I am listening to radio but I am listening to what I want, not what they want me to listen to ;)

Hope I made sense

[Nicole Simon]

I got completly annoyed by the fact over the weekend, that i could not put the gnomedex stream to pause - similar to Cam's episode outside the kindergarden it already has changed the way I accept media to be.

And while I have not listened to Radio in a very long time, never bought an audio book and only do watch TV for events like penalty shooting at soccer, I do listen to podcast. I am listening to one now. Advertisement? Okay with me, as long as they are interesting to me.

And with the kind of podcast, I listen to, I should be an easy 'target' for that - let's say for somebody offering me a coupon if I really would want to buy a x41 when it comes out.

Which tells you another problem, advertisement has to face: A show about tablet pc, produced in US for an Aussie network is listened to by a German and she tells her friends in Portugal about it.

Some advertisers must get nuts about that ... :))

[Cameron Reilly]

Nic - yeah, they will, but we have a plan to take care of it! Stay tuned!

[Tony]

You guys have plans for evrything. If your correct then it sounds like you have set up a pretty good business model indeed, and I know nothing about business..LOL

[sirshannon]

I've given up on TV news. I've given up on music radio (and/or radio music). After the first dozen or so podcasts I heard, I almost gave up on podcasts.

I've been watching TPN's development with a bit the whimsey I'm sure the old guys on the porch felt as they watched all the kids try to jump onto the bandwagon.

And now I think I owe you a "thank you" for helping make quality in podcasts something I no longer think is a lost cause or a needle in a haystack. Because of your efforts (and others'), I think there is a bit of hope for listeners and encouragement for producers. Here's to a second year. Hopefully you'll drive this bandwagon somewhere nice. :)